Technology is advancing at an unprecedented rate and forcing companies to adapt and become more flexible and innovative in order to remain competitive. Continuously improving your organization and its operational processes has become a vital part of modern‑day business.
Performance management is the ideal way to achieve critical objectives effectively and efficiently. But what are performance management’s biggest benefits? And how can you successfully implement this way of working? These are the questions we’ll be answering in this article.
What is performance management?
Performance management is a process that aims to correlate an organization’s objectives to those of its individual employees.
ManagementSite adopts the following definition:
‘Performance management entails systematically mapping strategy to operational processes (using KPIs), monitoring and evaluating these processes in order to gain feedback, and then determining if and how the original strategy needs to be altered. When combined with the intelligent use of information systems, this cycle ensures that organizations can respond more rapidly and effectively to internal and external changes.’
Performance management entails running your business based on organizational objectives and results. Key performance indicators (KPIs) generally play a major role in this process.
It’s a system of monitoring and managing your organization, with the aim of implementing its strategy and achieving its objectives, by mapping these to operational processes.
Why start with performance management?
There are many reasons why it’s worth your while implementing performance management. If you do it properly, it can take your organization to the next level. Here are a few of the foremost reasons:
1. Greater clarity
Performance management provides greater insight into the goals and results at management and staff levels alike. It involves making and documenting clear and concise agreements. By monitoring progress carefully and adjusting course accordingly, you can then help your organization achieve its objectives more effectively and efficiently.
2. Higher engagement
Proper performance management increases employee engagement within your organization and with its objectives. When your staff know your plans and goals and are involved in implementing and achieving them, they feel more appreciated, take more initiative, and experience a greater sense of self-fulfillment.
3. Broader insight
Performance management maps objectives and plans to operational processes throughout your company, and this allows bottlenecks, problems, or inconsistencies to be spotted more readily. And because you can see at a glance how your organization, departments, and individual employees are performing, it allows you to respond more agilely.
4. More options
Continuous feedback plays a key role in performance management. The advantage is that employees have greater control over their own tasks. They gain keener insight into their performance and respond more acutely whenever a process isn’t running according to plan. It also allows staff to make their personal goals and ambitions known to management.
5. More pleasant working environment
Motivated employees generally experience greater job satisfaction and are more loyal than disgruntled employees. Regular, thorough, and honest evaluation and feedback, combined with greater insight into organizational objectives, have a positive effect on morale, self-confidence, and job security – reducing fears among employees that they may be laid off unexpectedly. And what does this achieve? A more pleasant and relaxed working environment that results in higher employee productivity.
But what does performance management look like in practice? A key factor is a systematic approach. It takes more than simply stating a one-off objective and result. Continuous monitoring and feedback also play a vital role in its success.
It’s also important to realize that performance management isn’t a traditional top-down process. On the contrary, it will only succeed if all employees are actively involved in deciding and determining the objectives. The same also applies to monitoring progress towards achieving them.
Although there’s no one hard and fast way to implement performance management, there are a number of crucial steps involved:
Step 1: Goal setting
Firstly, determine your organization’s main goals and strategies. Where are we now? Where do we want to go? What do we need to get there? And what factors in our vision/mission are essential to our organization’s viability?
Next, map these goals to each level of your organization:
- to your organization as a whole
- to each department
- to management and staff
The balanced scorecard (BSC) method works well for this purpose. Once you’ve verified these goals, start implementing the strategies to achieve them.
Step 2: Performance planning
Map your goals to actual operational processes or improvement programs. What methods will you be using to improve operational processes? What tools will you be providing your staff to achieve these goals? And how will you be monitoring individual and departmental performance?
Step 3: Implementaion
Put your models into practice. Implement improvement programs and monitor them continuously. Making adjustments and improvements will gradually become both an individual and team mindset throughout your organization. Create a fixed schedule and performance/assessment cycle, because this is the best way to make performance management more tangible.
Step 4: Monitoring & analysis
Keep your finger on the pulse at all times. Monitoring is an essential part of performance management. Are we consistently achieving our main goals? Are the changes we’re making working? And are our employees comfortable in their roles?
Make sure that constructive dialog exists between management and staff, and among co-workers in general. Everyone should feel free to express their ideas and insights.
Step 5: Fine-tuning
Now you know what works and what doesn’t, continue fine-tuning the process still further.
What can we improve? And what tools and methods can we use to make further improvements? For example, training courses for staff having trouble reaching their targets?
Tips for successfully implementing performance management
As with any improvement process, there are certain dos and don’ts to be aware of to ensure your success. Take advantage of the following tips and tricks!
1. Create clarity
Make sure that your strategy and objectives are clear to everyone in your organization. Formulate your objectives as concretely as possible, for example using the SMART method, and make sure they’re widely available and accessible. This helps connect your company’s interests to those of your individual employees as naturally as possible.
2. Keep up the communications
Performance management is all about clear communications. It’s vital that you discuss progress regularly and at all levels, as this increases employee engagement in terms of performance, objectives, and mission. Regular contact between departments and levels also helps prevent conflicting objectives and results.
3. Visualize information
Good management information is a great way to tell your organization’s ‘performance management story’, but you have to present it well. It’s challenging for many companies these days to extract meaningful and intelligible management information from the mountains of data they’re accumulating. How you do this is critical.
Stephen Few explains in his book, Now You See It, how visualization is crucial to conveying the message hidden in your data. An infographic is the ideal medium for presenting complex information clearly, concisely, and compellingly.
4. Define your organization’s identity
Intrinsic motivation is the secret to performance management for which everyone in your organization is responsible. In order to determine what motivates and incentivizes your employees, it’s important to define your organization’s identity very clearly. Who are we and what do we stand for? What type of people do we want to attract to and keep in our company? And what motivates our employees?
For example, an organization with a lot of young employees would do well to emphasize growth and development. A sales organization could focus on clear targets and variable salaries based on sales figures.
5. Make managers facilitators
In the early days of performance management, managers often decided what was good for their employees. This traditional top-down approach is now highly outdated. Modern, flexible organizations have adopted self-management and self-organization, and rely on personal initiative at all levels. This is why it’s important that managers act as facilitators instead of decision makers.
6. Don’t focus on money
Although a good salary is important, many studies have shown that financial remuneration only has a limited effect on employee satisfaction and performance levels. Systems that focus solely on material rewards will rarely lead to the improved performance levels you were hoping for.
In practice, performance management is best based on nonmaterial rewards. Examples include autonomy, flexibility, training courses, and team building.
7. Encourage continuous learning
Markets and workplaces are constantly evolving in response to rapidly changing technological developments. To keep up, it’s vital that your employees learn new skills and expertise. Create a culture of continuous learning within your organization.
Use skills management software
We discussed in Tip 3 how the way you present information and visualize your data is critical to the success of performance management. Curious how you can achieve this? Our skills management software is the answer.
Our software allows you to keep track of employee development in a visually appealing fashion. It also offers countless features for improving productivity and creating even greater clarity.
- Map the skills and competences present in your organization quickly and easily.
- Replicate organizational structures and link employees to qualifications using drag ’n’ drop menus.
- Find the best replacements for employees off sick in a single search.
- Enter updates and training results real-time from the shop floor.
- Link projects to specific expertise and experience.